Why Americans Are Tipping Less and Less

Several years out of the pandemic, Americans are tipping less and less, according to a new report from restaurant management software company Toast.

In a new report, the company discovered tips took a dip from the first and second quarter of 2024. While total tips averaged 18.8 percent in the second quarter compared to 18.9 percent in the first quarter, this continues a wider scale downward trend of tipping in America.

The reduced tips were prevalent in both full-service and quick-service restaurants. Average sit-down restaurant dips went down to 19.3 percent from 19.4 percent in the first quarter, while quick service tips were down to 15.9 percent from 16 percent in the same time period.

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Michael Ryan, a finance expert and the founder of michaelryanmoney.com, said inflation fatigue might be a contributing factor to the lower tips. Year-over-year inflation was 2.9 percent in July, but Americans are still facing high costs in various sectors.

“People are feeling the pinch of higher prices across the board and may be tightening their belts when it comes to discretionary spending like tips,” Ryan told Newsweek. “There’s also growing pushback against ‘tip creep’—the expansion of tipping prompts into more and more places.”

During the pandemic, it became more standard for restaurants to ask for tips on to-go orders after dining rooms were temporarily closed to limit the spread of coronavirus. Now, it’s a common sight for tipping requests to be on iPads for everything from takeout and coffee orders to grocery store checkouts.

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“During the pandemic, we saw a surge in tipping as consumers wanted to support frontline workers,” Ryan said. “But that goodwill has waned as economic pressures mount. I’ve noticed in my own dining experiences that tip suggestions on receipts seem to start at higher percentages now, which may be causing some consumers to opt for lower amounts or skip tipping altogether.”

Tipping has become an increasingly confusing topic for consumers to navigate in the post-pandemic, with 72 percent of Americans saying they were being asked to tip service workers more frequently than in the past, according to a 2023 Pew Research survey.

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This can lead to confusion over when and how to tip, as only a third of Americans said it’s “extremely or very easy” to know when and how much to tip in the Pew Research survey.

Because tipping became a way to thank frontline workers during the pandemic, there’s now an expectation that restaurant and other service workers should still get higher tips, but the Toast report reveals Americans seem to be backing away from this trend.

“The slight decrease we’re seeing could signal a tipping point where consumers start to push back more strongly against expanded tipping culture,” Ryan said. “Businesses may need to reevaluate their pricing and compensation models. Workers need to be fairly paid without relying so heavily on discretionary tips.”

Software that is programmed with a standard tip amount is also drawing more tips for workers, but Americans might be more willing to add in a custom or zero amount for their tip than in the years right after the pandemic.

“I’ve noticed some locations going to place the gratuity directly on the bill versus me having to provide a tip,” Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, told Newsweek.

“When people see that, they are no longer obliged to offer additional tips which may lead to the general 15 percent gratuity to be what someone receives. I truly believe it disincentivizes people to tip when they see gratuity already included in their bills.”

While state minimum wages vary, the federal minimum wage is still set at $7.25 an hour, and many restaurant servers are paid less than that due to the expectation that their tips will supply them the federal minimum amount, if not much more. For tipped workers, the federal minimum wage is just $2.13 per hour.

In states with higher minimum wages for tipped workers, there’s inevitably going to be lower average tip percentages, experts say.

“If you are receiving a minimum wage based on state/federal mandates, tips may not be provided moving forward, and that may hurt the level of service provided,” Thompson said. “The tip incentivizes good service, and without that, everything may as well be fast food.”